Introduction

In the early 1980s, capital-intensive products dominated Brazil’s manufactured exports to the neighbouring Latin American economies. Recently, the country succeeded in entering advanced markets for capital-intensive products as well. The increasing importance of such items in Brazil’s manufactured exports may be attributed to the product-cycle hypothesis. According to this concept, newly industrializing economies enjoy locational advantages in producing standardized goods, which are capital-intensive in terms of physical capital, but do not require considerable inputs of highly skilled labour (human capital). Alternatively, government interventions may be responsible for the rising share of capital-intensive exports of Brazil. Policy measures may have created a competitive edge for domestic industries although they had no comparative advantage.